As the Federal Reserve is expected to quicken its tapering of Treasury and securities purchases, and interest rates are expected to rise, experts predict Commercial Real Estate will remain one of the best hedge investments against inflation.
In a recent news feature, John Chang, senior VP and national director of research services at Marcus & Millichap, noted CRE volume is up 19% versus Q3 2019 and that the amount of capital looking for solid returns is likely to keep CRE interest high.
Interest rates on 10-year Treasuries dropped to 0.7% by March of 2020 due to the Fed’s quantitative easing program and remained below 1% for the rest of the year, increasing spending and investment.
In 2021, however, interest rates have risen to 1.3%-1.5%, and inflation has more than doubled its pre-pandemic numbers. As a result, the Fed is reducing purchases by $15B this month and another $15B per month until June. Investors had expected the tapering, so markets have not been particularly disrupted by the news.
While the Fed’s tapering could cause a Treasury selloff, many market experts do not believe mortgage rates are likely to rise significantly as a result. (Source)